Data-center backlash reshapes the AI trade, favoring the largest operators
Seven Lights
The political backlash against data centers, underlined by Tuesday’s elections and 41 statewide ballot measures on slowing their construction, is reshaping the market’s pricing of the AI buildout, with analysts concluding that the largest operators are best placed to absorb the new risk.
About 53 per cent of the projected growth in the United States hyperscaler development pipeline sits in states where newly elected governors could impose restrictions on construction, according to a Wednesday report by BMI, a Fitch Solutions company. Nomura, in a note the same day, said any effect would become visible from 2028, since most projects planned for 2027 are already committed or under construction. Projects targeting 2028 carry the permitting uncertainty.
The strain predates the election. CoreWeave, Nebius and Iren, operators dependent on outside capital, each lost at least 30 per cent of their value in October, as investors concluded that permitting slowdowns would hit them before reaching the large cloud companies that are their main customers. Smaller operators face higher costs for new capital than hyperscalers, whose broader businesses and diverse revenues carry them through delays.
Equinix, whose facilities typically range from 30 to 60 megawatts, says its scale keeps it clear of the coming rules. Cyrus Adaggra, the company’s Asia-Pacific president, said United States legislation and regulation typically targets sites of about 100 megawatts and above: “Because we have a footprint that is typically less than 100 megawatts, we tend not to fall and be caught by the legislation or the regulation.” Equinix has raised annual capital spending from about $2 billion a few years ago to $7 billion, and “the number one determinant of our capex spend and build is customer demand,” Adaggra said.
Elsewhere the pressure has already acted. Sjoerd Leenart, who runs JPMorgan’s banking business in Asia Pacific, said authorities in Thailand and Australia had paused some projects to assess data centers’ energy demand on other industries and consumers, and he expected most new data-center investment to happen in Asia, where land, electricity and grid capacity remain available.
For investors, the consequence is a K-shaped trade: financially stronger companies advancing as more vulnerable operators struggle, a repricing that Bloomberg’s markets column has tracked through token prices, funding costs and construction risk. The Wall Street Journal reported that the backlash, by raising the barrier to entry, could ultimately play into the hands of the largest technology companies.